T-Bills Steadies as Markets Shifts Focus on CBN Auction
Godwin Emefiele, CBN Gov

T-Bills Steadies as Markets Shift Focus on CBN Auction

The rally in the secondary market for Nigerian Treasury bills was halted for a moment midweek as market participants shifted focus to the apex bank primary market auction for refinancing maturing bills. This kept yields steady ahead of the inflation data release.

Sequentially, money market rates close flattish with interbank rate closing in single digit high. Analysts hope to see the average yield on government instruments repriced with an expectation that new issue will come into the market as the year roll on. 

In a rare case, Both equities and fixed income markets have seen increasing buying interest from fund managers, a possibility that money supply in the local economy has breached the demand level. 

At the Central Bank of Nigeria (CBN) Auction, traders said demand was strong with downward adjusted to spot rates sparking concern due to expectations that the inflation rate for December will increase from 21.47% in November 2022. 

Given the strong subscription level, with a bid-to-cover ratio of 6.83x, the stop rates for the 91-day, 182-day, and 364-day bills fell to 2.00% (from 2.75%), 4.33% (from 7.15%), and 7.30% (from 8.49%), respectively.

Currently, investors’ returns have backpedalled even with high interest and inflation records, thus exposing naira assets to higher portfolio risks.  In the money market, the overnight lending rate remained at 9.8%, as the system liquidity closed at a net long position (NGN449.24 billion).

The financial system liquidity position is expected to drag because of outflow for NTB and FX auctions this week amidst low maturity. Traders predict short-term benchmark rates could cross 10%, and cash-rich Nigerian banks will start demanding higher NIBOR in the money market. In an email, Cordros Capital told clients that trading in the Nigerian Treasury bills’ secondary market was quiet. 

Thus, the average yield was flat at 2.9%. Similarly, the average yield was unchanged at 3.4% in the OMO segment. # T-Bills Steadies as Markets Shifts Focus on CBN Auction

>>>> Money Market Rates Sink as Liquidity Improves

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